Perhaps you have thought about investing in property as a sure-fire way to make a few quid – well this article is for you. “Buy-to-let”, as it is called, is now a highly desirable investment opportunity, due to the fact that it is extremely manageable compared to intangible stocks and shares.
Here we will explain what buy-to-let property investments actually are, whether they are right for you, and what the potential risks and rewards are.
First off, what actually is a Buy-to-Let Property Investment?
As it sounds; you buy a property with the sole purpose of letting it out to tenants. It is different to homeownership in that you are effectively running a business, in which you rent out spaces for people to live in, in order to create a steady income for yourself.
Is a Buy-to-Let Investment for You?
This sort of investment can be extremely rewarding. On saying that, there are still obviously risks involved, and you also have a responsibility with maintenance etc.
So, in a nutshell, here are the points to mull over if you are considering a buy-to-let investment:
– It is a long-term investment, and as such, there are no short-term gains
– It may take a while before you actually make any money
– There are obvious risks in the property market, such as the value of your property falling
– You must be sure to maintain your property to a high standard and have all the necessary safety checks done regularly, e.g. gas, electricity, fire safety etc.
– There are financial risks involved in borrowing money to purchase the property
If all these seem feasible to you, then a buy-to-let investment may be worth your while.
How much can you actually profit from a buy-to-let property investment?
Depending on the local market, you can make a fair profit from renting out your property or selling it when its value increases. The factors listed below will affect how much money you actually make:
You will make more money if:
– The local housing market has an increase in the value of its property
– You are fortunate enough to have a steady flow of reliable tenants
– You don’t have to fork out too much in maintenance for your property
However, these factors can eat into your potential profits:
– Tenants who fail to keep up with their rental payments
– Your property costs you a lot to maintain
– You struggle to find tenants in the first place
– There is a dip in local property prices
The majority of the risks associated with a buy-to-let property investment pertain to the housing market itself, which can be volatile, and it’s possible that your property could suffer a significant decrease in value. This would mean having to sell for less than what you paid for it. Also, market factors that are beyond your control can affect how much rent you can charge your tenants.
Other costs you need to be aware of before making a buy-to-let investment are:
– Stamp Duty Land Tax which needs to be paid on purchasing the property, just like with the purchase of any home
– You will need to take out Landlord insurance and Building insurance to protect yourself